ロング

TESLA: Fundamental Analysis + Next Target

アップデート済

One of the most popular stocks today is undoubtedly Tesla. Some will tell you that it is simply an overvalued automaker, while others will claim that it is a technology company that makes cars. In reality, it is a mixture of both, but investors must determine which option carries more weight.

In 2022, the stock fell 65%, which gave the company's detractors exactly the result they expected. Since the beginning of 2023, however, they are already up 35%, further spurring Tesla and Musk fans. So is this a signal to buy Tesla stock? Or has the stock (once again) risen too much and too fast? Let's get to the bottom of this.

CEO Elon Musk, who holds this position at Twitter, SpaceX, and many other companies, is at the center of Tesla's criticism. If you're not hiding your head in the sand, it's pretty obvious that Musk has spent a lot of time improving his new $44 billion toy, Twitter. What's worse, about 50 Tesla engineers have volunteered to work for Twitter.

Obviously, this can be a bit of a distraction, and it has worried many investors.

However, Tesla's latest quarterly results seem to have allayed those concerns. Tesla's Q4 production was quite impressive.

While the production numbers are impressive, there are still a few numbers that may worry investors. First, the number of days of inventory (how many days it will take Tesla to run out of current car reserves) rose to 13 days, up from eight days in Q3 and four days in Q2.

One could argue that 13 days is still a relatively small stockpile, but investors should keep an eye on this figure to keep it from reaching egregious levels. This would mean that Tesla is producing cars, but there is no consumer demand for them. For historical reference, that figure rose to 31 days in Q1 of 2019, so Tesla still has a lot to strive for before reaching that threshold.

Another issue that investors pointed to was the pressure on Tesla's margins. Tesla's gross margin fell to 25.9% in Q4, the lowest in five quarters. Falling gross margins could indicate rising input costs or weak pricing power, and as Tesla lowers prices on its models, that figure will come under additional pressure. Nonetheless, CFO Zack Kirkhorn said during the conference call that Tesla expects future gross margins to be at least 20 percent, even with lower prices.

This move will likely cause the auto industry's gross margin to fall to its lowest point in five years in 2023.

Lower gross margins mean less capital to make a profit, but Tesla made up for it by cutting operating expenses by 16%, something few other companies can say for themselves in Q4. These savings allowed Tesla to post Q4 earnings per share (EPS) of $1.07 - up 57%.

So even though Tesla investors need to watch out for a few items - margins and inventories - financially the quarter was excellent. But even the best companies bought at the wrong price can be a bad investment, so is it time to buy Tesla?

At its core, there is a huge gap between how bears and bulls think Tesla should be priced. Tesla is currently trading at 49 times its earnings, which isn't too bad compared to the 100 times or more it was trading at in 2021. However, if you look at Tesla's projected price to earnings (P/E), you see a different trend.

Since Tesla's trailing P/E ratio is about the same as its forward P/E, analysts believe that Tesla's earnings will barely rise from the 2022 level.

In 2023, Tesla plans to achieve a 50% compound annual growth rate in vehicle deliveries from 2020, which means about 1.7 million deliveries in 2023, or 29% more than in 2022. Even with a slight decline in gross margins, if Tesla can meet its delivery target, it will likely beat earnings forecasts, making the stock seem cheaper than it actually is.

Nevertheless, 45 times earnings projections is not a cheap price for any company. If you have your heart set on Tesla over the long term, buying the stock now and holding on to it (while you watch the business grow) may be a smart move. However, valuation is still a risk, and if Tesla falters and fails to meet its projections, the stock could sell off quickly.

Tesla is far from the safest asset, but at these levels, it still represents an intriguing investment opportunity.

ノート

Previous Analysis